“What taxes are there in Japan?”, “Is it the same in my country?”, you may wonder about Japan. In this article, we introduce the types of taxes in Japan for a basic understanding of Japanese taxes.
Table of Contents
Classification of Japan Taxes
Japan has approximately 50 different types of taxes. There are 3 ways to categorise Japanese taxes, according to whom they are paid, how they are collected, and what they are levied on. In this part, we introduce the classification of taxes in Japan so you can make a comparison with your own country’s tax system.
To Whom Tax is Paid (納付先)
Japanese taxes can be classified according to where or whom the tax is paid. There are two types, national tax and local tax.
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National Tax (国税) is paid to the country, and the money is used for matters related to Japan as a whole. Specifically, the tax money is used for national defence, social welfare, space development, etc. National taxes are also used in the event of major natural disasters that affect the country as a whole, and to help with reconstruction.
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Local Tax (地方税), or council tax, is paid to local governments such as prefectures and municipalities. The tax money is mainly used to improve the lives of people living in the area.
Collection Method (徴収方法)
The second way to classify Japanese taxes is by method of collection; there’s direct tax and indirect tax.
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Direct Tax (直接税) is paid directly by the person who obliged to pay. For example, income tax deducted from wages classified as direct tax.
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Indirect Tax (間接税), on the other hand, involves two different parties; the person who is obliged to pay the tax and the person who actually bears the tax. For example, consumption tax which is included in the purchase of goods and services is an indirect tax that is paid by the business owner (the person who sells or provides the service), but borne by the customer (who bought the goods and service).
Taxable Object (課税対象)
The last way to classify Japanese taxes is according to the object of taxation, or what the tax is levied on. There’s income tax, asset tax, and consumption tax.
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Income Tax (所得課税) is levied on the amount of remuneration earned by an individual or legal entity for work, minus necessary expenses.
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Asset Tax (資産課税) is levied on assets and property owned by individuals and legal entities.
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Consumption Tax (消費課税) is levied on the activity of consuming goods and services.
※ Ministry of Finance Japan, “税の種類に関する資料”
Writer's Pick
Types of Japan Taxes
Now that you know the 3 classifications of Japanese taxes, let us look at the types of taxes under each category. As there are many types, approximately 50, there are surely some that you have not heard of.
Income Taxation (所得課税)
The types of taxes levied on income include income tax, corporation tax, and resident tax.
National Tax
The following types of income tax fall under the category of national tax.
- Income Tax (所得税)
- Corporation Tax (法人税)
- Local Corporation Tax (地方法人税)
- Special Business Tax (特別法人事業税)
- Special Income Tax for Reconstruction (復興特別所得税)
The Special Income Tax for Reconstruction was introduced to finance reconstruction following the Great East Japan Earthquake that struck the Tohoku region on March 11, 2011. The earthquake caused extensive damage in many areas but especially in the Tohoku region, and a large amount of money will continue to be needed to cover the reconstruction costs. Therefore, the Japanese Government stipulated that those who pay income tax between January 1, 2013 to December 31, 2037 are obliged to pay this special income tax for reconstruction. Although the amount of tax to be paid has increased, it is a necessary tax to help the Tohoku people.
Local Tax
The types of income tax that fall under the category of local tax are:
- Resident Tax (住民税)
- Business Tax (事業税)
Resident Tax is levied on residents and inhabitants of a prefecture and municipality. It is payable by those whose previous year’s income is above a certain threshold. Therefore, in most cases, it is not levied in the first year you start work. From the second year of work onwards, the resident tax is deducted from your monthly salary. Further, resident tax is levied on the previous year’s income. Note that those whose income has fallen from the previous year due to changing jobs or going independent, the resident tax burden will be higher.
Asset Taxation & Etc. (資産課税等)
Asset & other taxes include inheritance tax, property tax, and real estate acquisition tax.
National Tax
The following types of asset tax fall under the category of national tax.
- Inheritance and Gift Tax (相続税・贈与税)
- Registration and License Tax (登録免許税)
- Stamp Duty (印紙税)
Inheritance and Gift Tax are both borne by the person who inherits property, but the circumstances for each are different. Inheritance tax applies when property is received from a deceased person, while gift tax applies when property is received from a living person. Gift tax has tax exemption (up to a certain amount is not subject to tax), so many people transfer property to their children or spouse before they pass away.
Registration Tax is levied when ownership of real estate, such as land and buildings, is publicly registered. And, stamp duty is imposed when agreements are made, etc.
Local Tax
The following types of asset tax fall under the category of local tax.
- Real Estate Acquisition Tax (不動産取得税)
- Fixed Asset Tax (固定資産税)
- Special Land-Holding Tax (特別土地保有税)
- Discretionary Ordinary Tax (法定外普通税)
- Business Office Tax (事業所税)
- City Planning Tax (都市計画税)
- Water Utility and Land Profit Tax (水利地益税)
- Public Facilities Tax (共同施設税)
- Housing Land Development Tax (宅地開発税 )
- National Health Insurance Tax (国民健康保険税)
- Discretionary Special-Purpose Tax (法定外目的税)
Fixed Asset Tax, also called Property Tax, is a tax on land, buildings, or depreciable assets. Depreciable assets are items that decrease in value over time, such as company computers and equipment. Aircrafts and ships owned by companies and individuals are also counted as depreciable assets, and therefore subject to fixed asset tax.
Business Office Tax is levied on companies and sole proprietors with businesses above a certain size. However, only certain municipalities practise business premise tax. Basically, the tax applies to businesses in large cities and large populations.
Consumption Taxation (消費課税)
In addition to the typical consumption tax we know, other consumption taxation include automobile weight tax and tobacco tax.
National Tax
The following types of consumption tax fall under the category of national tax.
- Consumption Tax (消費税)
- Alcohol Tax / Liquor Tax (酒税)
- Tobacco Tax / Cigaratte Tax (たばこ税)
- Special Tobacco Tax (たばこ特別税)
- Gasoline Tax (揮発油税)
- Local Gasoline Tax (地方揮発油税)
- Petroleum Gas Tax (石油ガス税)
- Aviation Fuel Tax (航空機燃料税)
- Petroleum Coal Tax (石油石炭税)
- Promotion of Power Resources Development Tax (電源開発促進税)
- Automobile Weight Tax (自動車重量税)
- International Tourist Tax (国際観光旅客税)
- Tariff / Customs Duty (関税)
- Tonnage Tax (とん税)
- Special Tonnage Tax (特別とん税)
Alcohol and Cigarette Taxes have high rates because they are highly desirable goods. Automobile Weight Tax is levied on the weight of the vehicle. The heavier the vehicle, the greater the burden it places on the environment and the roads, therefore the tax rate is also increased accordingly.
As for Tonnage Tax, it is paid by foreign trading ships that enter Japanese ports. The tonnage tax is levied at a certain amount per tonne.
Local Tax
The following types of consumption tax fall under the category of local tax.
- Local Consumption Tax (地方消費税)
- Local Tobacco Tax / Cigarette Tax (地方たばこ税)
- Golf Course Utilization Tax / Golf Tax (ゴルフ場利用税 )
- Gas Oil Delivery Tax (軽油引取税 )
- Automobile Tax (自動車税（環境性能割・種別割）)
- Light Automobile Tax (軽自動車税（環境性能割・種別割）)
- Mining Tax (鉱区税)
- Hunting Tax (狩猟税)
- Mineral Tax (鉱産税)
- Bathing Tax / Hot Spring Tax (入湯税 )
Automobile Tax is levied on owners of motor vehicles. The tax rate varies depending on the engine displacement of the vehicle owned, but is a fixed rate only for light automobiles (軽自動車).
The Local Consumption Tax is included in the consumption tax. In Japan, the consumption tax rate is 10% as of January 2022, and 8% for items subject to a reduced rate. Of this, 2.2% is paid as local consumption tax at the standard rate, and 1.76% at the reduced rate.
※ National Tax Agency, “No.6303 消費税及び地方消費税の税率”
Unusual Tax Types in Japan
There are some taxes in Japan that you’ve probably never even heard of or thought could exist. In this part, we introduce some of them.
Golf Course Utiliation Tax (ゴルフ場利用税 gorufu-jou riyou-zei)
In Japan, there is a golf tax levied on golfers by local authorities. The golf course use tax is included in the golf course fee. Those who are under 18, over 70, and disabled are exempt from paying the tax.
The reason for the golf tax is that golf is considered a luxury sport with higher fees than that of other sports facilities. Therefore, golfers that can afford to enjoy the sport are deemed to have the tax-bearing capacity and thus subject to this special tax. The aim of the tax is also to make users bear the costs of maintaining the golf course.
Golf in Japan is usually a weekend sport. If you are interested in trying golf in Japan, you should check the average cost of playing golf in Japan beforehand.
Bathing Tax / Hot Spring Tax 入湯税 (nyuutou-zei)
The Bathing Tax, or Hot Spring Tax, is paid when using hot springs in Japan. Generally the tax rate is 150 yen per day per user, but the amount varies from municipality to municipality. The tax rate is often higher at popular hot spring areas.
The bathing tax is used by the municipality to improve the environment and sanitation, and to promote tourism. The tax is only levied on mineral spring baths, not on artificially heated super sentos, spas and similar facilities.
Sento is a Japanese public bathhouse, which is not the same as a hot spring facility. Read more about Sentos in Sento: Uncovering Japan's Public Bathhouses.
Dog Tax (犬税 inu-zei)
Dog tax is a tax levied on dog owners, and has been introduced in Germany, the Netherlands, and Switzerland. It was first introduced as a luxury tax, as people who could afford to keep a dog were considered to be financially well-off. However, these days, countries that levy dog tax do so from an animal welfare perspective. The aim behind the tax is to reduce the number of irresponsible dog owners.
Although now abolished, there were local municipalities in Japan that introduced the dog tax until 1982.
To Close
There are about 50 different types of taxes in Japan. Each is collected for a specific purpose and is used to improve the lives of people living in Japan. Educate yourself on the taxes in Japan, and use it as an opportunity to deepen your understanding of Japanese economy.
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